The decentralized finance (DeFi) space has been snowballing in recent months. New protocols and projects are coming up regularly. However, the insurance sector has slowly adapted to this unique ecosystem. Only a few insurers offer coverage for hacking risks associated with DeFi protocols. According to BanklessTimes.com, although billions have been lost through hacks in the DeFi sector, a mere 1% or less of its funds are under insurance. Jonathan Merry, the CEO of BanklessTimes, commented on the data. He said: The lack of insurance coverage poses a significant risk to users of DeFi protocols. DeFi faces frequent hacks and security breaches. In the event of a hack, users of a DeFi protocol may be unable to recoup their losses if there is no insurance coverage. Insurance companies have been hesitant to enter the DeFi space due to its high risks. DeFi protocols are largely unregulated, and malicious actors can exploit their smart contracts. Additionally, some use complex algorithms, making insurance coverage a challenge. However, as the DeFi ecosystem grows and matures, we will likely see more insurers offering coverage for hacking risks. In the meantime, users of DeFi protocols should be aware of the risks they are taking on and should take steps to protect themselves accordingly.
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